THE campaign to hit almost all goods bought online with a 10 per cent GST is underway with consumers told they could have to pay an extra $1 billion a year for their overseas shopping.

The government of Prime Minister Tony Abbott today was urged to drop the GST-free threshold for items bought online from overseas suppliers from $1000 to $20.

This would be "money for jam" and would help states pay for their health and education systems, said former Victorian Premier John Brumby who today released a report on reform of federal-state relations.

In 2011 Mr Brumby joined former NSW Premier Nick Greiner and businessman Bruce Carter to review the goods and services tax for then Prime Minister Julia Gillard but their findings were not adopted.

He believes the Audit Commission set up by Prime Minister Abbott could recommend changes to the GST, and the tax on online purchases could be among its options.

"This (GST-free shopping) is costing Australian jobs, it's costing Australian retailers, it's a reverse tariff, it's an unlevel playing file and it needs to be fixed,'' Mr Brumby told the National Press Club in Canberra.

"And the beauty of computer technology and the internet is that in the old days these things might have been costly to administer, but I don't believe that's the case now.''

He said the application of a consumption tax on goods bought on the internet was "a complete non-issue'' in Britain, the US and Canada, and could help state finances here.

"This is worth, conservative, more than $1 billion a year at the moment in GST to the states," said Mr Brumby.

"If I was the Treasurer of Victoria and someone came up to me and said here's a cheque for $250 million, that would make a big difference to my bottom line. For some of the states it's the difference between whether they are AAA (credit rating) or AA."

He said: "The proportion of online offshore purchases as a proportion of total retail sales is just galloping away.

"And this is money for jam in a sense."

"Why is it, if I buy a camera in Melbourne for $1000 I pay 10 per cent GST; if I buy it online I pay nothing.

"And it's worse than that. If I buy expensive cameras I can buy one for $2500 and they'll send it to me in three bits, so that each bit is under $1000.''

Mr Brumby said that expanding the scope of the GST would be simpler than altering other aspects, which could include the rate of the tax or its distribution among states.

"This is going to be a debate about these things,'' he said.

"As general rule the simpler the tax system the better it is. And so I think these things ... this debate will percolate and surface over the next few years.''